This is in response to a letter from your office dated March 27, 2014, which transmitted the referenced second appeal on behalf of the City of Duluth (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) denial of certain claimed direct administrative costs associated with recovery from 2012 flood damage. As explained in the enclosed analysis, the Applicant retained a contractor to assist in the recovery process, and claimed direct administrative costs (DAC) incurred by the contractor separately from project formulation. The documentation that Applicant provided FEMA summarizing the contractor’s claimed costs, however, included numerous expenses that could not be charged directly to a particular project in accordance with Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs. FEMA properly disallowed those indirect expenses from the amount of DAC claimed by the Applicant. Therefore, I am denying the appeal. Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.